2000 (2) TMI 833 - HC - Indian Laws

Summary

Issues Involved:
1. Constitutionality of Section 52-A of the A.P. Revenue Recovery Act, 1864.
2. Legality of the action taken by the A.P. State Finance Corporation (APSFC) to enforce dues.
3. Liability of the petitioners for the debts of the dissolved partnership firm.
4. Whether the APSFC's claim is barred by limitation.
5. Whether the petitioners' letter dated 18-10-1988 constitutes an acknowledgment of debt under Section 18 of the Limitation Act.
6. Whether the petitioners' letter dated 18-10-1988 constitutes an agreement under Section 25(3) of the Contract Act.
7. Appropriateness of adjudicating the limitation issue under Article 226 of the Constitution.

Detailed Analysis:

1. Constitutionality of Section 52-A of the A.P. Revenue Recovery Act, 1864:
The petitioners initially sought a declaration that Section 52-A of the Act is unconstitutional. However, this issue was not pressed during the hearing in view of a prior decision by the Division Bench of the Court in Grandhi Kamaraj and others v. Government of Andhra Pradesh, 1996 (2) ALD 1193, which upheld the vires of the provision.

2. Legality of the Action by APSFC:
The petitioners contended that the APSFC's actions to enforce dues through notices dated 5-10-1988 and 15-11-1988 were illegal. APSFC argued that the petitioners, as partners, were jointly and severally liable for the debts of the firm despite the dissolution of the partnership and the transfer of assets and liabilities to new partners, Durga Prasad and Sambasivaram. The Corporation claimed that the conditions for such a transfer were not met, and thus, the petitioners remained liable.

3. Liability of the Petitioners:
The petitioners argued that they ceased to have any interest in the firm's assets or liabilities after the dissolution on 25-2-1981 and that the new partners undertook to discharge all liabilities. APSFC denied knowledge of this arrangement and contended that the petitioners remained liable due to the lack of prior consent from the Corporation for the change in partnership, which violated the loan terms.

4. Limitation of APSFC's Claim:
The central issue was whether APSFC's claim was barred by limitation. The Court noted that the term loan was sanctioned in 1971, and no payments were made towards installments or interest. The Corporation's demand notice was issued on 5-10-1988. The Court concluded that the claim was barred by limitation as it was beyond the prescribed period under Articles 62 and 137 of the Limitation Act, 1963.

5. Acknowledgment of Debt under Section 18 of the Limitation Act:
APSFC argued that the petitioners' letter dated 18-10-1988 constituted an acknowledgment of debt. The Court held that for an acknowledgment to extend the limitation period under Section 18, it must be made before the expiration of the prescribed period. Since the letter was beyond the limitation period, it could not serve as an acknowledgment of debt.

6. Agreement under Section 25(3) of the Contract Act:
APSFC alternatively contended that the letter constituted an agreement under Section 25(3) of the Contract Act. The Court examined the letter and found that it did not constitute a promise to pay the total debt but was merely a proposal to pay Rs. 40,000 in full settlement, made without prejudice to the petitioners' rights and contentions. The Court concluded that there was no agreement between the petitioners and APSFC under Section 25(3).

7. Adjudication under Article 226:
APSFC argued that the limitation issue should not be decided under Article 226 as it involved mixed questions of law and fact, suggesting that the petitioners should seek remedy through civil proceedings. The Court, however, found that all relevant facts were already pleaded, and there was no need to refer the matter to another forum. The Court decided to adjudicate the limitation issue within the writ proceedings.

Conclusion:
The Court declared that the APSFC's claim of Rs. 2,46,218.70 against the petitioners was barred by limitation and could not be recovered under the provisions of the A.P. Revenue Recovery Act. The writ petition was allowed, and no costs were awarded.